ITAT Deletes Rs 2.06 Crore Addition Under Section 68 for Unsecured Loans:

The assessee is The Stock and Bond Trading Company which was engaged in the business of trading in shares and derivatives. For Assessment Year 2013–14, it filed its return declaring nil income. During scrutiny assessment under Section 143(3) of the Income Tax Act, the AO made additions towards unsecured loans under Section 68 and assessed the total income at Rs 5,59,58,524.

In the first round of litigation, the Tribunal remitted the matter to the CIT(A) to examine additional evidence furnished by the assessee. After obtaining a remand report from the AO, the CIT(A) deleted part of the addition but sustained Rs 2,06,70,000 relating to six lenders, holding that their creditworthiness had not been established. The assessee challenged the sustained addition before the Tribunal.  

The Tribunal held that the assessee had discharged its initial burden of proving the transactions, by providing all the sufficient documents thereby shifting the onus to the AO. It found that the AO had not made any independent inquiry or attempted to verify the lenders, despite having their confirmations, PAN details and addresses. The Tribunal further observed that the absence of income-tax returns, by itself, was not a convincing ground to treat the assessee as having failed to establish the loan transactions in the circumstances of the case. 

The Tribunal held that the appellate order sustaining the addition of Rs 2,06,70,000 under Section 68 was not sustainable. Accordingly, it set aside the order of the CIT(A) and directed the AO to delete the entire disputed addition.